China's copper cathode output in September was 1.01 million mt, an increase of 23,000 mt or 2.3% month-on-month, and a growth of 11.3% year-on-year. The output increased 25,900 mt compared with the expected 986,100 mt. The cumulative output from January to September was 8.4861 million mt, an increase of 874,800 mt year-on-year, an increase of 11.49%.
Although four smelters undertook maintenance in September, the overall impact was not significant. We believe that there are several reasons for the higher-than-expected production in September: 1. Several smelters slightly reduced operating rates due to the National Day holidays in October and they rushed to produce in September; 2. The production capacity of several smelters in Shandong and north-west China was released, and the output increase was significant. 3. The commissioning of a new smelting plant in east China also contributed to part of the output growth. Domestic blister copper supply tightened in September as the price spread between copper cathode and copper scrap shrank. This was also reflected in the decline in RCs of blister copper. According to the latest statistics from SMM, as of end-September, the average RC of blister copper in the south was 850 yuan/mt, a drop of 100 yuan/mt from the beginning of September. Therefore, some smelters reduced output. The average operating rate of copper cathode industry rose 2.19 percentage points month on month to 94.21% in September.
In October, according to SMM statistics, three smelters have maintenance plans, and the operating rates of many smelters in October will be slightly lower than that in September due to holiday factors. Therefore, we believe that the output in October will decrease slightly to less than 1 million mt. According to the production schedules, SMM predicts that the domestic output of copper cathode in October will stand at 996,000 mt, a decrease of 16,000 mt or 1.58% from the previous month, but a year-on-year growth of 10.5%. The accumulated output from January to October is expected to stand at 9.48 million mt, an increase of 11.39% or 969,600 mt year on year. SMM understood that three smelters started production in October, but only one of them actually yielded output. The other two will not yield output until November. Therefore, we expect that domestic copper cathode production will return to more than 1 million mt in November.
